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San Diego is joining a growing movement of cities using local policies to counter rising income inequality and falling real wages.
City Council President Todd Gloria, other Council members and a community coalition called Raise Up San Diego announced plans to put a comprehensive measure on the November ballot in support of earned sick days and an increase in the minimum wage.
Research on earned sick days and on the higher minimum wage rate in San Francisco shed important light on the economic impacts when cities raise the low-wage floor.
Ten years ago, San Francisco became the first city in the U.S. to enact a city-wide minimum wage ordinance. The wage floor, now $10.74, is indexed to maintain buying power over time. More than 50,000 workers received higher pay as a result of the law, and low-wage workers earnings increased by an estimated $1.2 billion over the next decade.
The minimum wage law enabled San Francisco to buck a national trend of declining real wages (meaning adjusted for inflation) for workers at the bottom of the income spectrum. Between 2003 and 2013, real wages for low-paid workers stagnated and then fell in surrounding Bay Area counties and the rest of the country. But in San Francisco, wages rose.
The city also passed a paid sick leave ordinance in 2006. Workers earn one hour of paid sick leave for every 30 hours worked. While employers initially expressed concern about San Francisco’s ordinance, a survey after the law was implemented found broad employer support.
Critics warned that these laws would kill jobs and hurt economic development – just like opponents are now doing in San Diego. Extensive academic research on San Francisco’s policies, however, found wages and benefits improved significantly for tens of thousands of people without hurting employment or the economy.
From the first quarter of 2004, when the minimum wage ordinance took effect, to the first quarter of 2011, employment in restaurants, the industry most affected by the law, increased by 17 percent in San Francisco, compared with 13 percent in neighboring Bay Area counties without raised wages.
San Francisco’s experience is not unique. Economists from universities across the country compared hundreds of pairs of counties with different minimum wage rates across state borders over a 16-year period. They found the same thing: Minimum wages raised incomes without harming employment.
In a separate study using similar methods, University of Massachusetts, Amherst professor Arindrajit Dube also found that raising the minimum wage was an effective strategy to reduce poverty. The $10.10 national minimum wage proposed by Sen. Tom Harkin and Rep. George Miller would reduce the number of people in poverty by 4.6 million.
But how did San Fransisco pay for higher wages? Workers stayed in their jobs longer, generating savings to employers on turnover costs. Another source of savings came from improved performance.
After a mandated wage increase at the San Francisco International Airport, employers reported reduced absenteeism and grievances, improved morale and better customer service.
Consumers absorbed the rest of the costs through slightly higher prices at restaurants. After the 26 percent minimum wage increase, prices in San Francisco restaurants rose 2 to 3 percent more than in similar restaurants across the bay. Price increases in other sectors were negligible.
Since San Francisco passed its minimum wage ordinance, eight other cities and counties, including San Jose, have done the same. Many more cities are currently considering their own proposals. Five other cities and Connecticut have adopted earned sick days policies.
These policies make good economic sense, especially in cities that have higher-than-average costs of living.
The California minimum wage, even after the scheduled increases, will stay low by historical standards, and it isn’t indexed for inflation.
Jobs that pay too little for families to live on continue to pose a major problem for local economies. City-based policies can be part of the solution.
Ken Jacobs is chair of the UC Berkeley Labor Center, and Michael Reich is a professor of economics and director of the Institute for Research and Employment at UC Berkeley. They are co-editors along with Miranda Dietz of When Mandates Work: Raising Labor Standards at the Local Level. Jacobs and Reich’s commentary has been edited for style and clarity. See anything in there we should fact check? Tell us what to check out here.